31 May 2022
The iMOVE CRC engaged Tulipwood Economics to prepare a single overarching report that integrated the evidence on Working from Home (WfH) to date and highlighted the main findings of four iMOVE sponsored research projects. iMOVE also requested that Tulipwood Economics provide policy recommendations based on the evidence identified in the program of work as well as the broader public policy context in Australia. As part of this remit, Tulipwood Economics developed a conceptual framework to guide the interpretation of the evidence and consideration of policy recommendations.
The Australian Federation’s public policy response to COVID, which included establishing a National Cabinet, suspending ‘non-essential’ office-based work – especially in March and April 2020, created a unique national policy challenge. Millions of Australian workers abruptly switched from their twice-daily capital city commute to an office setup of some form in their home. Mandatory social distancing policies dramatically increased the prevalence of working from home, from a rare occurrence for most workers to being the norm for almost all ‘non-essential’ workers (whether desired by employers and employees or not).
The capacity to transfer a sizable proportion of national economic output from the workplace to the ‘home office’, utilising the ‘digital highway’ has been an important indicator of economic and social flexibility and resilience. High income countries such as Australia, with greater digital capacity, flexible regulatory and planning systems, and fiscal and monetary ‘fire power’, are more likely to absorb the economic and social shock and return to pre-COVID economic performance and social wellbeing relatively quickly.
Figure E-2 (below) brings together the most common themes explored across the four research streams. This graphic illustrates the primary economic agents (employees and employers), and markets and policy considerations involved in the WfH ‘post-COVID voluntary bargain’. The schematic clearly shows the complexity of the issue and the direct and indirect impacts the increased prevalence of working from home will have on a number of markets – such as the Australian labour market, transport market, commercial and residential property markets and the education market.
Assessing the evidence – Capacity to WfH
The capacity to work from home depends on the degree to which individual employees can durably carry out their functions physically isolated from both (a) their colleagues, and (b) consumers or service recipients. The survey evidence from the four research project groups indicates that:
- Between 40-50% of the Australian workforce could feasibly work from home some days of the work week to complete some job tasks, however capacity varies widely when estimated by industry and occupation;
- The industries with the greatest capacity to transition to WfH are those that largely employ office-based workers with minimal capital requirements beyond a laptop and internet access: Information, Media and Telecommunications; Financial and Insurance Services; Agriculture, Forestry and Fishing; Professional, Scientific and Technical Services; and Electricity, Gas, Water and Waste Services;
- The industries with the least capacity to transition to WfH are those that are characterised by a high degree of customer, client or patient physical contact and are not, therefore, amenable to the transition in general: Accommodation and Food Services, Health Care and Social Assistance, Retail Trade, and Transport, Postal and Warehousing.
- To some extent, COVID accelerated the shift of a limited number of health care services (e.g. GP consultations) to the telehealth model, but the overall effect has not been significant to date.
Overall, the proportion of people working from home, which had increased to about 8% by 2019, increased to around 40% in 2020 before declining slightly to be 38% of the Australian labour force in 2021 (Figure E - 2), (PC, 2021).
Looking forward – Not every worker will get to work from home
Not every worker is able work from home and not every worker wants to work from home. Likewise, not every employer wants to, or is able to, offer a WfH employment option. The nature of an occupation – the job tasks performed – is key to the ability to work from home. The particular job tasks involved, required technology, worker and organisational-level productivity, and employer and employee preferences together establish the upper-bounds of WfH capacity. Contextual factors such as an economy’s labour market, industrial structure and the legislation and industry-specific codes that govern working arrangements play an important role.
Given these constraints, there is broad agreement across the research project groups that between 40-50% of job tasks cannot be done, or are not sufficiently well suited to be done, from home. It is, therefore, remarkable how many workers demonstrated at least some capacity to be productive working from home at the height of the lockdowns across Australia, increasing from less than 1 million workers on any particular day in 2019 to around 5 million workers out of a labour force of 13 million during the peak COVID lockdown periods in 2020.
The research groups concluded that, on any given day, up to one-quarter of Australia’s workforce could be working from home operating in a hybrid WiO/WfH model whereby the working week is split between the workplace and the home (generally, in a 3:2 or 2:3 split across a five day work week).
- Transport demand, especially between the suburbs and CBD’s of Australia’s capital cities, may decline by as much as 20% compared to pre-COVID levels and current growth trajectories.
- This reduction, if it materialises, would impact public transport services most heavily. PT pricing policies, although not generally calibrated to achieve ‘full cost recovery’, may need to be reviewed.
- Given that crowding in the peak is one of the key barriers for people choosing to use PT, WfH has the capacity to reduce crowding and thus, somewhat counter-intuitively, make it more attractive. Further, greater work flexibility means more flexibility in departure time choice. As a result, it may be that commuter demand might be distributed more evenly through the day, with a greater retention of pre-pandemic passenger load.
The mass adoption of WfH is a complex phenomenon with diverse economic and social impacts. As these impacts—both positive and negative—play out, there will be potentially many adjustments made to employer-employee agreements and household arrangements, which will in turn affect regional transport and property markets, transport network investment and planning, and government policy. With a greater focus on local activity, there may be a need to reprioritise improvements in local public transport, safer pedestrian walkways and precincts, and bicycle lanes, serving short distance trips throughout the day, with the added benefit of improving first and last mile connectivity to public transport and (hopefully) contributing to improved health outcomes through greater physical activity.
Many of the impacts will be, ultimately, translated into changes in the returns to labour (i.e. wages), capital (i.e. profits) and asset prices (e.g. commercial and residential land values). The transport market will adjust via fares and fees charged and network asset prices, and potentially government revenue and expenditure decisions.
Perhaps the most profound lesson to be drawn from the increased prevalence of WfH is Australia’s demonstrated flexibility and resilience in adjusting to major shocks. That capacity to absorb shocks, by altering the way everyday things are done, is at the heart of Australia’s economic resilience. Australia’s largely successful weathering of the pandemic is in no small part a result of its flexibility, agility and willingness to make the best of a mandatory WfH model for most ‘non-essential’ Australian workers.